The majority of the characters in the "Little House" books were real people. The majority of the places described in these books were real places. There was, however, artistic license (for lack of better term) used for the storytelling in these books.
I would like to state that I was fortunate enough to attend a guided tour of The Laura Ingalls Wilder Historical Society in De Smet, South Dakota approximately 10 years ago. The tour guide explained to the group that some of the places that we were being shown and the people that we were learning about were actual people and places that were depicted in her books. However, due to the harsh reality of homesteading life, the majority of the storytelling in her books was fictionalized. (as described by my tour guide)
Laura Ingalls Wilder began writing her memoir (that would later be an autobiography titled Pioneer Girl) in 1930 at the encouragement of her daughter due to financial difficulties the family was facing because of the stock market crash of 1929. The memoirs were originally intended for a novel targeting an adult audience, but were edited and revised and essentially marketed as fictional children's books.
An article published in 2014 by The Guardian quotes Wilder biographer and publishing director:
Wilder's fiction, her autobiography, and her real childhood as she
lived it are three distinct things, but they are all closely
intertwined, and readers will enjoy seeing how they reflect one
another. Even more interesting, though, are the places where one story
differs from another, and Pioneer Girl: The Annotated Edition explores
these differences too," said Nancy Koupal, the publisher's director.
The majority of the characters in her books are real. Her mother, father, sisters, Reverend Alden and Mr. Edwards. However, their character is usually beyond reproach in her books. The memoirs of Ms. Wilder seem to depict certain characters differently.
Some of the revelations are startling: a wealthy neighbor asks to
adopt 10-year old Laura, a sign of the Ingalls family's severe
financial struggles; at one point, Pa threatens to skip town without
paying rent; the real-life Rev. Alden, saintly in the books, turns out
to be "a pious fraud and a cheat."
There are certain stories that are completely true and not overstated. One example is Laura's sister, Mary going blind. As described in one of the books of the series, By the Shores of Silver Lake, Laura attributes Mary's blindness to scarlet fever. Mary Ingalls did actually go blind due to what they thought at the time was scarlet fever.
It should also be stated that there has been much controversy surrounding the authorship of the "Little House" books. Many accuse Ms. Wilder's daughter, Rose Wilder Lane of being the ghostwriter of her mother's books. This is due to the correspondence between mother and daughter during the time the book(s) were being written as well as Ms. Lane being a respected author herself (though not nearly as celebrated as her mother). This led mother and daughter to have several conflicts. However, Ms. Lane did the editing and "embellishments" using her mother's stories as sources.
Wilder’s writing was both uniquely her own and a product of
collaboration with her daughter. Wilder provided a base of
plainspoken language and deeply felt storytelling; Lane embellished,
shaped and “heightened the drama.”
While Laura Ingalls Wilder and her daughter had their conflicts, they were both concerned with making money on the books. This is what caused the stories to be "embellished" or "dramatized" to appeal to a younger audience.
The first book in the “Little House” series began as a memoir that
Wilder called “Pioneer Girl.” With revisions, subtractions and
additions, Wilder and Lane worked through an obstacle course of
reversed decisions by prospective publishers, as well as a shift in
the target audience, from adults to children. “Little House in the Big
Woods” crossed the finish line of publication in 1932, as “juvenile”
The "Little House" series of books depict real people, places and some real stories when pertaining to major life events. For the most part, the books are embellished and/or dramatized versions of Laura Ingalls Wilder's memoirs.
Note: There was also a popular and long-running television series based on the "Little House" books titled Little House on the Prairie that aired from 1974 - 1982. This series featured characters and places from the book series, but took drastic creative liberty with the story telling (as should be expected from a television show). This is just another example of the real people from Laura Ingalls Wilder's stories being exaggerated for dramatic purposes.